Real estate investors looking for ways to defer their capital gains taxes often consider Delaware Statutory Trusts (DSTs). DST 1031s are popular among investors who want to exchange their investment properties with a trust to avoid the tax hit they would get in a traditional sale. In this blog post, we will break down everything you need to know about delaware statutory trust 1031 to help you make a sound investment decision.
What is a Delaware Statutory Trust 1031?
Delaware Statutory Trust 1031 is a legal entity that allows investors to exchange their real estate assets without incurring capital gain taxes. Essentially, investors can sell their investment property and then use the proceeds to purchase an ownership interest in a Delaware Statutory Trust. Investors can pool their funds together and acquire either a fractional interest or a whole DST property. Furthermore, these trusts can own several investment properties, which makes them an excellent option for diversification.
Who is eligible to participate in DST 1031 investments?
Any real estate investor who owns an investment property and are looking to exchange it with another property is eligible to participate in DST 1031 investments. Note that this exchange can only be done with an equal or higher-priced property, and the entire transaction must be handled by a qualified intermediary.
What are the benefits of investing in a DST 1031?
One of the most significant benefits of investing in a DST 1031 is that it allows investors to defer their capital gains taxes when exchanging their investment properties. Additionally, DSTs eliminate the need for active management, which means that investors can enjoy a passive investment similar to investing in a real estate investment trust (REIT). DSTs also provide a standard reporting process, making it easier for investors to report on their taxes.
What are the risks involved in DST 1031 investments?
Like all investments, DST 1031s come with their risks. These risks include the potential loss of capital, credit risk, and illiquidity. Additionally, DST investments have a minimum holding period, which means investors cannot sell their ownership interests for at least two years after the purchasing date.
Conclusion:
In a nutshell, Delaware Statutory Trust 1031 is an excellent option for real estate investors looking to defer their capital gains taxes while acquiring an interest in a diversified real estate investment portfolio. When investing in DSTs, it’s important to remember the risks involved and to do thorough research before making any investment decisions. We hope this blog post has informed you on the basics of DST 1031 investments and helps you make an informed investment decision.